Performance Management and 360° Assessments: different but compatible
Company culture is not a key performance indicator (KPI)
There is a debate in leadership development circles about whether 360° assessments should form part of a company’s performance management system. It is possible to use 360s very effectively as part of a performance management process, but it comes with risks and Thornhill believes there are good reasons to keep them separate. We make the case here, while accepting that our clients may have a different point of view. In the conclusion it is suggested that there is a potential bridge between the two worlds. The central argument is that both serve important purposes, but that their value may be compromised when combined. Performance management has its roots in a century old discipline that aims to ensure that companies extract the best value out of each employee. 360° assessments on the other hand fill a more modern need: to ensure that the leadership of modern, complex organisations exhibit the behaviours and capabilities that blend the individuals and teams into a coherent and sustainably effective organisation.
Scientific and Performance Management: Then and Now
As mass scale industrialisation took root in the United States in the first decades of the 20th Century, Frederick Taylor (and others) sought to improve enterprise productivity through his “Principles of Scientific Management”.
The thirty second summary is:
- Define the most efficient way of getting each task completed.
- Choose the right person for each job, and ensure they have the right tools and the training to maximise output.
- Monitor worker performance as defined and reward productivity.
- Define the respective roles of management and workers.
This is, quite eerily, also a good thirty second summary of performance management systems found in the quite different context of the modern corporation. Of course, there is some jargon missing: but if we were to add the terms “strategic plan”, “SMART objectives”, “key performance indicators”, and “performance bonus”, then Taylor’s principles would fit in well.
Performance management, then as now, is about creating a clear line of sight from company profitability to how each person does their job and, therefore, how well they should be rewarded. If it is to be fair and objective, and if everyone is to know what is expected of them, then jobs should be clearly defined, performance standards clearly set, and the assessment of performance should be transparent.
Performance management is all about how you are doing in your current job: where are you exceeding expectations and where are you falling short? The end result is a score which may have direct consequences for income and career prospects, and whether you will still have a job in six months’ time. As a result, performance management processes are generally tense, even unpleasant affairs on both sides of the table. No-one enjoys them. The conversations are more like positioning statements, and each party is meant to bring documents and evidence to support their ratings. Disagreements are sorted out by a kind of unofficial bargaining or worse, an appeal process which just adds to the highly frictional nature of the process.
360° Assessments Inhabit a Different Space
Performance management is vital. Jobs must be clearly defined, annual KPIs well matched with team and company targets, and employees and their managers must take stock regularly and constructively throughout the year.
However, an organisation’s success is dependent on many other things. Company culture, staff engagement, the extent to which every employee brings their best selves to work; the extent to which staff co-operate, the sense of loyalty employees have to their managers, how much energy goes into “hiding” performance issues – these things are critical to the long-term success and sustainability of companies and to their short-term productivity. None of this can be satisfactorily captured in the performance management system – because company culture is not a KPI.
This space between individual and team performance on the one hand, and organisational culture on the other, is shaped by innumerable “messages” that emanate mainly from the behaviour of executive and middle management. They set the tone; they lead by example. What they do, and what they tolerate will tell you what it is like to work in this organisation.
This is the space best served by 360° assessments. They are designed specifically to assist managers to understand how their behaviour impacts others. This creates an opportunity for personal development – self-reflection followed by a commitment and a plan to make better use of one’s strengths, and to modify some of the behaviours which are inhibiting one’s effectiveness. They are also, often, a good way to prepare managers for their next job.
There are a number of reasons why this is best conducted outside of the precisely defined KPIs of performance contracting:
- The 360° assessment looks at about fifty behaviours. This is way too many to form part of the clear picture that is required for a fair performance appraisal.
- The picture that emerges from a 360 is more of a subtle portrait than an accurate photograph. The learning is in the trends, not in each specific detail (which incidentally highlights the need for coached feedback to participants).
- It is impossible to come to a discussion about one’s behaviours with an open and curious mind, if you know that your salary, bonus and career prospects may be immediately affected by the outcome.
- The selection of raters is an important part of any 360° assessment and should aim for a cross-section of informants with different perspectives. This process gets immediately “politicised” if it is linked to a performance appraisal.
- Thornhill has had some experience of raters “gaming” the process, where colleagues agreed to score each other high so as to improve the performance rating attached to the 360. This may be an admirable example of teamwork, but it hardly enhances the value of the assessment!
Performance management and 360° assessments may belong in separate spaces. However, there is a bridge between them. It can happen, for example, that all direct reports indicate in their ratings that their manager neither sets clear objectives for them, nor holds them accountable for achieving the objectives. This could certainly become information that helps shape a key performance indicator for the manager’s next performance contract.
Performance management is about how each person does their job, in the context of the company and team plan. If it is to be fair, it must be measurable and focused on a few specific objectives with clear indicators. 360° assessments are about the many behaviours of leadership and focus on how we all work together. They are both essential to company function. For the reasons given above, Thornhill believes they are best conducted as separate exercises, which may, at times, feed into each other.
For more information on Thornhill’s various products and services for all levels within your organisation, please contact us on firstname.lastname@example.org.
Written by Cedric de Beer
 FW Taylor: The Principles of Scientific Management. Dover Publications 2012